$RF calls up 5-fold before earnings

Bullish option traders are racking up gains in Regions Financial ahead of quarterly results tomorrow.

On Dec. 26, Investitute’s market scanners identified the purchase of 10,000 January $14 calls for $0.29 as part a bullish roll with shares $13.02. This was clearly a new position, as volume was double the strike’s previous open interest.

Those calls traded for $1.56 just before the closing bell this afternoon, more than 5 times their purchase price. The stock rose 19.58% in the same time period, underscoring how options can far outperform their underlying shares.

Long calls lock in the price where investors can buy a stock, letting them position for a rally at limited cost with the potential for significant leverage. They carry less risk than owning shares because the most that can be lost is the price of the options no matter how far the stock might fall.

RF was up 1.36% to $15.61 today. The regional bank is scheduled to report earnings before the market opens tomorrow morning.